On 9 April 2020, in response to the COVID-19 pandemic, the Australian Securities and Investments Commission (ASIC) announced that it will extend the deadline, by one month, for unlisted entities to lodge financial reports under Chapters 2M and 7 of the Corporations Act 2001 (Cth) (Corporations Act), for those entities with balance dates from 31 December 2019 to 31 March 2020.

This extended deadline will assist those entities whose
financial reporting processes take additional time due to factors such as remote
working arrangements, travel restrictions and other impacts resulting from the
COVID-19 health emergency.

The extended
lodgement period explained

ASIC’s extended lodgement period applies to financial reports, directors’ reports and audit
reports for unlisted entities. The deadlines are calculated as periods
after the relevant balance dates.

Under Chapter 2M of the Corporations Act, the deadline for the lodgement of full-year financial reports, directors’ reports and auditor’s reports for:

unlisted disclosing entities and unlisted registered schemes, is extended from 3 months to 4 months, and

all other unlisted entities, is extended from 4 months to 5 months. This applies to both public and proprietary companies which are not disclosing entities or registered schemes.

Note that an extension
of the deadline for unlisted registered schemes to lodge compliance plan audit
reports will automatically occur as a result of the extension for registered
schemes. The period for auditors to complete the compliance plan audit report
will therefore also be extended from 3 months to 4 months.

Under Chapter 2M of the Corporations Act, the deadline for the lodgement of half-year financial reports, directors’ reports and audit/review reports for unlisted disclosing entities, including unlisted registered schemes which are disclosing entities, is extended from 75 days to 75 days plus 1 month.

Under Chapter 7 of the Corporations Act, the deadline for the lodgement of profit and loss balance sheets, and any associated information, for:

unlisted Australian Financial Services Licensees (AFSLs) that are body corporates and are also disclosing entities or registered schemes, is extended from 3 months to 4 months,

unlisted AFSLs that are body corporates and are not disclosing entities or registered schemes, is extended from 4 months to 5 months, and

AFSLs that are not body corporates, is extended from 2 months to 3 months.

How the
extended timeframes will work in practice

For an unlisted public company that is not a disclosing
entity, the normal deadline to lodge its reports for the year ending 31 March
2020, is 31 July 2020. Under ASIC’s extended timeframe for lodgement, the
deadline will now be 31 August 2020.

However, it is important for entities to note that the
extended deadlines will only apply where the normal reporting deadline had not
passed as of 9 April 2020 (when ASIC made its announcement). For example, the
deadline for a 31 December 2019 balance date of a managed investment scheme was
31 March 2020. Hence no extended reporting period will apply, as the reporting
deadline has already passed. However, the deadline for a proprietary company
which is not a disclosing entity is 30 April 2020. As this deadline had not yet
passed as at the date of ASIC’s announcement, the extended deadline will now be
31 May 2020.

Financial
reporting periods after 31 March 2020

ASIC is continuing to assess the impact of COVID-19 on
financial reporting for entities with reporting balance dates after 31 March
2020, particularly at 30 June 2020. ASIC will make further announcements for
these entities in due course, depending on how the COVID-19 situation evolves.

What does this mean for corporations?

Where possible, it is recommended that corporate entities
continue to lodge their financial reports within the original statutory
deadlines and only avail of the extended timeframes where absolutely necessary.
This will ensure that corporations continue to meet their statutory and
regulatory obligations, as well as ongoing obligations to their shareholders
and creditors.

It is also important to note that where a grandfathered
proprietary company uses the extended deadline relief, it will continue to
retain its grandfathered status. The directors’ report of such a company must disclose
that the company has applied the ASIC relief to report to members no later than
1 month after the normal reporting deadline.

What’s
next?

ASIC is closely monitoring ongoing market conditions
amid the COVID-19 pandemic, for developments which may affect financial
reporting. At present, there appears to be no significant issues for the
relatively small number of listed entities with a 31 March 2020 balance date,
in meeting their full-year and half-year financial reporting obligations.
Timely reporting by these entities is important; however, where appropriate,
ASIC will consider applications to extend the reporting deadline for individual
entities in appropriate circumstances. Applications should ideally be made at
least 14 days prior to the normal reporting deadline and include sufficient
detailed information to allow ASIC to assess the impact of COVID-19 on the corporate
entity in question.

Further
reading and sources

Please subscribe to our dedicated COVID-19 blog for all the latest updates on the COVID-19 pandemic. We are here to assist you and your company in navigating the ongoing legislative and regulatory changes in response to COVID-19.

LLB (USYD). Grad. Dip, Legal Practice (UTS). Grad. Dip, IT Law (UTS) June is a law graduate with a wealth of legal and commercial experience. She graduated top of her class and started her legal career as a paralegal in a number of boutique law firms where she gained broad experience in commercial law, litigation, property law, family law, criminal law, wills & estates and immigration. June was then engaged as a Legal Project Manager for legal disruptor and startup, LegalVision. June was the first point of contact for client enquiries relating to intellectual property, leasing and corporate immigration. June joined Wolters Kluwer in July 2019. In her capacity as legal content editor for Company Law, June writes and edits content covering all aspects of the Corporations Act and bankruptcy & insolvency law, as well as ASIC and ATO releases.

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